LACK OF MARKET ACCESS HURTS CANADA’S OIL PITCH.

Market access issue dissuades investors

HOUSTON • As U.S. producers celebrate the resurgence of their oil and gas sector, Canadian companies are trying to attract the attention of the world’s energy investors.

“I would encourage investors and other stakeholders to look past the shortterm issue (of Canadian export pipeline constraints) and consider the incredible quality of the resource, the industry, the track record of innovation,” Alex Pourbaix, president and CEO of Cenovus Energy Inc., told a presentation Tuesday at CERA Week, a major Houston energy conference.

Pourbaix and other Canadian oil and gas CEOs are here this week pitching their companies as the local oil patch cheers on its dramatic ascendance — the United States is on pace to become the world’s largest oil producer.

Indeed, in a report Tuesday, consultant Wood Mackenzie predicted an 11 per cent growth in U.S. oil production this year. That followed a report Monday by the International Energy Agency forecasting U.S. production growth of 28 per cent over the next five years to 17 million barrels of oil per day by 2023.

The IEA forecast Canadian production would grow by 16 per cent, or 790,000 bpd, to 5.6 million bpd over the same period, but that growth was constrained by a lack of export pipelines.

“I can see the contrast,” said Brandon Myers, Americas upstream analyst with Wood Mackenzie of the difference in outlook between Canadian and U.S. producers.

“There are profitable Canadian companies, but the sheer scale of companies that can make it work is more noticeable here (in Texas),” Myers said.

One of the most obvious examples of the divergence between the Canadian and U.S. oil industries came from Houston-based ConocoPhillips, which continues to own some oilsands assets in Canada but is a big investor in U.S. shale production.

“The growth in the U.S. is coming, it’s probably going to soak up most of the incremental oil demand,” ConocoPhillips CEO Ryan Lance said during a presentation.

Last year, ConocoPhillips sold off the majority of its oilsands assets and a massive natural-gas land package to Calgary-based Cenovus Energy Inc. in a blockbuster $17.7-billion deal.

Lance had some pointed criticism for Canadian regulators and governments, who are attending the conference in Houston.

“There’s a limited amount of capital and lots of places looking to attract that capital,” he said, adding the Canadian industry and the Alberta government specifically “recognize the competitive landscape has changed” in favour of the U.S.

Alberta Energy Minister Marg McCuaig-Boyd said the province is continuing to push the federal and B.C. governments on the need for new pipelines to correct the current problem. “I think they need to step up a little more and show a little more leadership in this matter,” she said of the federal government.

Greg Stringham, a Calgary-based energy consultant and former Canadian Association of Petroleum Producers executive, said it is frustrating the Canadian industry is now a position where it needs to aggressively pitch investors on their companies.

“All of those investors are looking at it and saying, ‘Yes, the resource is there but show me that you can do market access. Show me you can get that to market,’” Stringham said.

Stringham also said the current difficulty Canadian companies are experiencing in attracting investment will ease over time. “We’ll go through this short term but Canada has the resources and technology — if we can get market access — we’re going to be the place people turn in the longer term,” he said.

Natural Resources Minister Jim Carr is expected to discuss the federal government’s view on the situation in a joint panel with U.S. Energy Secretary Rick Perry and Mexican Energy Secretary Pedro Joaquin Coldwell on Wednesday.

A handful of international oil companies that have exited or sold portions of their oilsands assets in the past year have described at the Houston conference how they have shifted their focus to the lowest-cost oil formations amid the price collapse that began in 2014.

Lance said ConocoPhillips had “reworked its global portfolio” in order to drive down sustaining capital needs during the price collapse.

Similarly, Paris-based Total SA CEO Patrick Pouyanne said Monday his company had shifted its focus from multiple oil and gas formations around the world to the five lowest-cost parts of its portfolio — and that the lowest-cost oil in the world is in the Middle East.

“I prefer to spend my money and the money of my shareholders in these five areas,” Pouyanne said. He said the company had previously focused on too many regions and “we were not able to add value for our shareholders.”

Total recently resolved a dispute with Calgary-based Suncor Energy Inc. and Vancouver-based Teck Ltd. over funding for the massive $17-billion Fort Hills oilsands mine, which began producing oil in January, by giving Suncor a small percentage of its interest in the oilsands mine.